Oaktree Capital Management, the world’s largest distressed debt investor with $100 billion of assets under management, is set to expand its investment and marketing personnel in the Asia-Pacific region as it prepares to invest more into China and India’s distressed debt markets.
“We’re expanding personnel both investment personnel and marketing personnel and the reason for that is pretty straightforward; this is the most dynamic economy in the world. When an economy is growing and savings are growing, while the need to get yield is growing it’s best to get Oaktree involved,” Oaktree’s chief executive officer Jay Wintrob said at a press briefing in Hong Kong on Monday.
“China and India are countries where the legal system, the bankruptcy code, the sanctimony of rule of law is still underdeveloped in a very positive way. But as those institutions develop along with the predictability of the outcomes, the willingness to uphold the priority of creditors vis-à-vis one another, you will see more opportunities to invest more aggressively.”
Asia-Pacific has been Oaktree’s fastest growing region since Wintrob joined the firm 2014, he pointed out. About $14 billion of capital has been committed to the firm’s strategies from Asia-based investors, while between 4-5 percent of its assets are held in the region.
The firm currently employs 60 personnel across seven offices including Seoul, Sydney, Hong Kong, Beijing and Tokyo.
In 2015, the firm teamed up with Guangzhou, China-based Shoreline Capital to acquire $168 million of Chinese non-performing loans. Oaktree also partnered with China Cinda Asset Management in 2013 to jointly invest in distressed assets in China and was one of the cornerstone investors in its $2.5 billion initial public offering.
Wintrob said the firm has invested in four NPL pools in China and also made investments ranging from real estate debt to infrastructure in Japan, Korea and Australia.
With the size of China’s credit market growing at least four-fold since 2008 as well as growth in its shadow banking system, investors like Oaktree are well positioned to access such opportunities, he added.
“We are in a period of very high degrees of uncertainty, very high levels of debt being issued with very little in the way of covenant protections, very low interest rates driven in large part by Federal Reserve and central bank action, and very high asset prices,” Wintrob explained. “That’s kind of a witch’s brew of stuff that’s likely to get worse than get better but risk on – everyone’s comfortable.”
Oaktree has around $8.63 billion in real estate assets under management across debt, income and opportunistic strategies. Most recently the Los Angeles-headquartered firm raised a total of $694.39 million in capital for its real estate debt fund, Oaktree Real Estate Debt Fund II, from 27 investors since launching last year, according a Securities and Exchange Commission (SEC) filing earlier this year. And in Q4 2016 the firm had amassed $464 million for its latest opportunistic fund, Oaktree Real Estate Opportunities Fund VII, which it launched in July 2014 and has so far garnered $2.9 billion.